Prepare a Winning Loan Modification Application

Loan modification has no doubt won its place as the best way to avoid foreclosure and get one’s mortgage back on track. But the fact is that not every loan modification application gets approved, and even completing the paperwork may not be enough to qualify. At the end of the day, it’s a question of whether or not a loan modification will make financial sense to the lender, rather than what’s best for you.

But that doesn’t mean your loan modification application is out of your hands. Below are some steps you can take to ensure a successful application with your bank.

Start early.
Before the program was popularized, borrowers typically had to be at least 90 days in default to apply for a loan modification. However, with new government policies, anyone can now submit a loan modification application, even if their mortgage is current. As soon as you start having difficulty making ends meet, call up your lender and ask about your options. That way, you can start finding solutions before it gets too complicated.

Do your research.
Most loans today are either owned by one lender or converted into mortgage-backed securities, which are basically “pieces” of the mortgage distributed between several investors. Mortgages that fall under the latter are harder to modify because there are more parties concerned, each of which has to approve the loan modification application. Find out who owns your mortgage by calling your bank or looking it up on government websites.

Write a convincing letter.
The hardship letter is one of the main requirements in a loan modification application. It’s where you explain to your lender how you fell behind and convince them that you can stay current once the loan is modified. Make sure to keep everything factual—you can appeal to emotion by drawing attention to certain details, but you can’t exaggerate or twist the facts. Most importantly, keep it brief but detailed—too short and you can’t really explain much; too long and the agent won’t even want to read it.

Work with the pros.
If you’re not sure you can do it yourself, consider hiring a loan modification attorney. He or she can help you make quicker contact with the lender, prepare your loan modification application, and give you advice on staying on track once your loan is modified. It may cost more at the outset, but the assurance and convenience it offers can be well worth your money.